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The zones of discrimination for M-Score is as such:
An M-Score of less than -2.22 suggests that the company is not an accounting manipulator.
An M-Score of greater than -2.22 signals that the company is likely an accounting manipulator.
During the past 13 years, the highest Beneish M-Score of Vonage Holdings Corp was 0.99. The lowest was -5.34. And the median was -3.01.
The M-score was created by Professor Messod Beneish. Instead of measuring the bankruptcy risk (Z-Score) or business trend (F-Score), M-score can be used to detect the risk of earnings manipulation. This is the original research paper on M-score.
The M-Score Variables:
The M-score of Vonage Holdings Corp for today is based on a combination of the following eight different indices:
|M||=||-4.84||+||0.92 * DSRI||+||0.528 * GMI||+||0.404 * AQI||+||0.892 * SGI||+||0.115 * DEPI|
|=||-4.84||+||0.92 * 1.0118||+||0.528 * 0.9848||+||0.404 * 1.0801||+||0.892 * 1.0162||+||0.115 * 0.9595|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0071||+||4.679 * -0.1125||-||0.327 * 1.1849|
|This Year (Sep15) TTM:||Last Year (Sep14) TTM:|
|Accounts Receivable was $22.7 Mil.|
Revenue was 223.36 + 221.858 + 219.73 + 214.632 = $879.6 Mil.
Gross Profit was 147.961 + 149.432 + 148.687 + 148.995 = $595.1 Mil.
Total Current Assets was $144.1 Mil.
Total Assets was $795.7 Mil.
Property, Plant and Equipment(Net PPE) was $48.1 Mil.
Depreciation, Depletion and Amortization(DDA) was $58.3 Mil.
Selling, General & Admin. Expense(SGA) was $478.3 Mil.
Total Current Liabilities was $178.1 Mil.
Long-Term Debt was $233.5 Mil.
Net Income was 3.433 + 8.347 + 7.469 + 5.604 = $24.9 Mil.
Non Operating Income was -0.05 + 0.032 + -0.577 + -0.01 = $-0.6 Mil.
Cash Flow from Operations was 37.665 + 35.237 + 10.724 + 31.309 = $114.9 Mil.
|Accounts Receivable was $22.0 Mil.
Revenue was 214.71 + 218.878 + 220.733 + 211.22 = $865.5 Mil.
Gross Profit was 149.03 + 150.486 + 151.574 + 125.56 = $576.7 Mil.
Total Current Assets was $132.7 Mil.
Total Assets was $592.6 Mil.
Property, Plant and Equipment(Net PPE) was $43.8 Mil.
Depreciation, Depletion and Amortization(DDA) was $48.6 Mil.
Selling, General & Admin. Expense(SGA) was $467.3 Mil.
Total Current Liabilities was $176.1 Mil.
Long-Term Debt was $82.7 Mil.
1. DSRI = Days Sales in Receivables Index
A large increase in DSR could be indicative of revenue inflation.
|DSRI||=||(Receivables_t / Revenue_t)||/||(Receivables_t-1 / Revenue_t-1)|
|=||(22.669 / 879.58)||/||(22.048 / 865.541)|
2. GMI = Gross Margin Index
Measured as the ratio of gross margin in year t-1 to gross margin in year t.
Gross margin has deteriorated when this index is above 1. A firm with poorer prospects is more likely to manipulate earnings.
|=||(GrossProfit_t-1 / Revenue_t-1)||/||(GrossProfit_t / Revenue_t)|
|=||(149.432 / 865.541)||/||(147.961 / 879.58)|
3. AQI = Asset Quality Index
AQI is the ratio of asset quality in year t to year t-1.
|AQI||=||(1 - (CurrentAssets_t + PPE_t) / TotalAssets_t)||/||(1 - (CurrentAssets_t-1 + PPE_t-1) / TotalAssets_t-1)|
|=||(1 - (144.135 + 48.063) / 795.661)||/||(1 - (132.724 + 43.771) / 592.637)|
4. SGI = Sales Growth Index
Ratio of sales in year t to sales in year t-1.
Sales growth is not itself a measure of manipulation. However, growth companies are likely to find themselves under pressure to manipulate in order to keep up appearances.
5. DEPI = Depreciation Index
Measured as the ratio of the rate of depreciation in year t-1 to the corresponding rate in year t.
DEPI greater than 1 indicates that assets are being depreciated at a slower rate. This suggests that the firm might be revising useful asset life assumptions upwards, or adopting a new method that is income friendly.
|DEPI||=||(Depreciation_t-1 / (Depreciaton_t-1 + PPE_t-1))||/||(Depreciation_t / (Depreciaton_t + PPE_t))|
|=||(48.57 / (48.57 + 43.771))||/||(58.309 / (58.309 + 48.063))|
6. SGAI = Sales, General and Administrative expenses Index
The ratio of SGA expenses in year t relative to year t-1.
SGA expenses index > 1 means that the company is becoming less efficient in generate sales.
|SGAI||=||(SGA_t / Sales_t)||/||(SGA_t-1 /Sales_t-1)|
|=||(478.265 / 879.58)||/||(467.336 / 865.541)|
7. LVGI = Leverage Index
The ratio of total debt to total assets in year t relative to yeat t-1.
An LVGI > 1 indicates an increase$sgai= in leverage
|LVGI||=||((LTD_t + CurrentLiabilities_t) / TotalAssets_t)||/||((LTD_t-1 + CurrentLiabilities_t-1) / TotalAssets_t-1)|
|=||((233.515 + 178.149) / 795.661)||/||((82.732 + 176.051) / 592.637)|
8. TATA = Total Accruals to Total Assets
Total accruals calculated as the change in working capital accounts other than cash less depreciation.
|=||(NetIncome_t - NonOperatingIncome_t||-||CashFlowsfromOperations_t)||/||TotalAssets_t|
|=||(24.853 - -0.605||-||114.935)||/||795.661|
An M-Score of less than -2.22 suggests that the company will not be a manipulator. An M-Score of greater than -2.22 signals that the company is likely to be a manipulator.
Vonage Holdings Corp has a M-score of -3.02 suggests that the company will not be a manipulator.
Altman Z-Score, Piotroski F-Score, Accounts Receivable, Revenue, Gross Profit, Total Current Assets, Total Assets, Property, Plant and Equipment, Depreciation, Depletion and Amortization, Selling, General & Admin. Expense, Total Current Liabilities, Long-Term Debt, Net Income, Non Operating Income, Cash Flow from Operations
Vonage Holdings Corp Annual Data
Vonage Holdings Corp Quarterly Data